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Hong Kong tipped to approve hedge fund tax breaks, attracting investment, talent

The bill, expected to pass this year, will exempt private equity and venture capital funds from paying tax on performance-linked income

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The Hong Kong government is expected to pass a bill offering tax breaks to hedge funds which will potentially attract investment and new talent to the global city. Photo: Jelly Tse
Themis Qi
Hong Kong’s determination to boost its role as a global wealth management hub has raised market expectation that the city will approve a bill offering tax relief to hedge funds within this year.

Speaking at a media briefing on Tuesday, Sandy Fung, KPMG China’s partner of tax and alternative investments, said the bill would be passed “soon” by the Legislative Council (LegCo), the city’s lawmaking body.

“The bill could attract lots of funds and related talent to settle in Hong Kong, further cementing the city’s status as a global asset management centre,” Fung said.

If passed, the bill will exempt private equity fund companies and venture capital funds from paying tax on performance-linked income and salary tax on fund managers’ performance-linked bonuses starting from April 2025, as long as they meet certain requirements.

The drafted law, titled the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026, was gazetted in mid-June and was moved to the second reading in the LegCo on June 24.

It would make Hong Kong the first global city to offer accurate and detailed rules for tax break on carried interests and performance-linked income to funds and their managers, which KPMG’s Fung described as “an unprecedented and revolutionary improvement”.

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